Friday, February 19, 2010

Union Budget 2010 -11: stimulus packages must continue

Stimulus Package & Easy Money:

The real estate sector is at crossroads. On a revival path after it went through tough times owing to economic slowdown in the country, the revival, though, is mainly on account of stimulus packages given by government to the economy. The easy-money policy adopted by the RBI, which led to softening in interest rate, also helped the process of revival in the sector.

Industry and real estate players, though, feel any withdrawal in the stimulus packages and hike in interest rate will be counterproductive and will affect revival of economy, particularly real estate sector.

Improve Affordability of Home Buyers:

The government should take measures to improve affordability of end users. To this end, he says government should raise existing slab of Rs 1,50,000 to Rs 3,00,000 against the payment of home loan. This amount is deducted from the assessee's income to compute income tax.

“This limit was set many years ago and needs to be revised to bring it to current levels. This will help people who want to rent their homes. It will induce and incentivise more people to rent their investment properties. It will immediately increase the total available house stock in the market,” says Rohit Gera, Joint Managing Director, Gera developments Pvt. Ltd.

Infrastructure Status to Residential Township:

Real estate sector, including residential township projects , should be granted infrastructure status.

Exemption of Income Tax on the Profit - extension of the 80-IB scheme:

Budget should extend tax concessions to residential sector by allowing exemption of income tax on the profit made by developers in constructing small houses of less than 1000 sq ft in Delhi and Mumbai and 1,500 sq ft in other cities.

This will be a huge incentive to developers to build affordable houses in the country. In fact, it will help contain prices in real estate sector in the country.

Tax break for specific types of housing:

1) Affordable housing units
2) Homes meeting specific environmental standards
3) Special Treatment for Rental property

To read more, please, visit Prabhakar Sinha-The Economic Times

Restore Tax Holidays:

Executive director of KPMG in India, Jai Mavani, said the last six months have seen a turnaround in the real estate segment because of the decision of the industry to lower prices (which re-generated the pent-up demand as homes became more affordable) and banks became more flexible in allowing debt re-structuring which gave a breathing space and holding capacity to many developers avoiding distress sales.

“Now, however, liquidity is drying up as central bankers, including in India, debate the phased withdrawal of the stimulus package. On the other hand, the government is concerned about the inflationary aspects, particularly on the socially sensitive residential sector. That said, there is merit in considering restoration of tax holidays for IT parks (Section 80-IA) and affordable housing (Section 80-IB) in light of the current downturn in commercial property market as well as the significant supply deficit in affordable housing.” To read more, please, visit Dileep Athavale | TNN

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